High-acuity inpatient stays up 41%, likely result of upcoding

Upcoding for inpatient hospital stays continues to be a problem, with a recent RAND study showing that the cost of upcoding totals around $14.6 billion.

That shakes out to around $5.8 billion in hospital payments from private health plans and $4.6 billion from Medicare, the researchers wrote in Health Affairs.

"These findings add to the evidence that hospitals may move patients into the highest billing category in order to increase the amount they are paid for patient care," Daniel Crespin, lead author of the study and an economist at RAND, said in a statement. "This suggests that government programs and private payers are paying billions more each year than what would be expected based on historical rates."

Upcoding is a practice in which providers submit CPT codes in a higher billing category in order to receive higher reimbursements. Healthcare experts consider upcoding a form of medical fraud.

Despite that, upcoding is happening now more than previously, the RAND researchers said.

Using data from five states between 2011 and 2019, the researchers found that the number of patient discharges documented at the highest intensity of care increased by 41%.

However, after assessing patient demographics, preexisting comorbidities, length of stay and hospital characteristics, the researchers estimated that the increase should have been 13%. This likely indicates the practice of upcoding, they said, adding that around two-thirds of the growth in high-intensity hospital stays is the result of upcoding.

Upcoding was most common for discharges related to heart failure and shock, with the researchers noting a 27% increase in the number of discharges upcoded between 2011 and 2019. Other common discharges included simple pneumonia and pleurisy, chronic obstructive pulmonary disease, septicemia or severe sepsis without mechanical ventilation for 96 or more hours and bronchitis/asthma.

The increase of upcoding is likely due to certain diagnosis-based payment systems, the researchers explained. In 1983, Medicare introduced payment systems that reimburse hospitals in a lump sum, creating diagnosis-related groups paid based on a principal diagnosis. Payments are also based on complications and additional illnesses.

Private insurance companies have also adopted diagnosis-related groups.

This system might incentivize providers to upcode patients to a higher severity diagnosis group, as this practice can increase payment. However, as noted above, upcoding can be considered a form of medical fraud when providers upcode to a level of complexity that is not appropriate. The RAND researchers pointed out that upcoding can sometimes accurately reflect the severity of a patient's illness.

"These findings can contribute to the growing body of evidence supporting the design of payment models that limit distortions in payment and resource allocation," Crespin stated.

Sara Heath has covered news related to patient engagement and health equity since 2015.